Chapter 4. Figure It Out 4.4

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Antonio gets utility from consuming two goods, burgers and fries. His utility function is given by U = √ BF = B0.5F0.5 where B is the amount of burgers he eats and F the servings of fries. Antonio’s marginal utility of a burger is MUB = 0.5B-0.5F0.5 , and his marginal utility of an order of fries is MUF = 0.5B0.5F-0.5 Antonio’s income is \$20, and the prices of burgers and fries are \$5 and \$2, respectively.

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Question

Burgers cost \$5, and fries cost \$2. If Antonio maximizes his utility, how many fries should he purchase to accompany every burger?

Antonio should buy +jEDcWw2tUQ= servings of fries for each burger he purchases.

When Antonio maximizes utility, his MRSBF = PB/PF. Antonio’s MRSBF = F/B; PB/PF = 5/2. So, F/B = 2.5, or F = 2.5×B. Antonio should purchases 2.5 orders of fries for each burger he buys. For further review see section “Combining Utility, Income, and Prices: What Will the Consumer Consume?”

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Question

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